The oil price took a tumble overnight as US crude supplies rose 2.28 million barrels last week according to the US Energy Information Administration, and more falls could be coming in the weeks ahead.

Crude inventories rose 2.3 million barrels when analysts had guessed (forecast) a gain of only 1.3 million, according to Bloomberg. US imports rose to the highest level in almost four years as output slipped and officially entered a bull market on August 18, less than three weeks after sinking 20%.

West Texas Intermediate (WTI) benchmark oil dropped 3.6% to US$44.70 a barrel, while Brent crude oil fell 2.8% to US$47.04 a barrel.

The Organisation of Petroleum Exporting Countries (OPEC) plans to meet later this month to discuss ways to stabilise crude oil prices. Led by Saudi Arabia, the world’s biggest oil exporter, several OPEC members are producing record amounts of oil in a bid to maintain their market share, after increased oil supply from the US led to oil prices plunging from above US$100 a barrel to below half that value.

But like previous formal talks to discuss ways to freeze production levels, this one also appears doomed to failure.

And that’s simply because OPEC has lost its dominance of the oil market. Should OPEC countries agree to freeze production and trigger a rise in oil prices, US shale drillers are likely to re-enter the market, taking market share.

And that spells bad news for Australia’s oil and gas producers including BHP Billiton Limited (ASX: BHP), Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Origin Energy Ltd (ASX: ORG). Shares in the big four oil co’s were down 2.8%, 0.8%, 1.5% and 2.3% respectively in early trading.

Given the current global oversupply of oil, it’s hard to see oil prices recovering to anywhere near US$100 a barrel anytime soon.

And as we noted earlier this week, Santos in particular, could be forced to write down the value of its assets yet again – given the high prices the company has used to estimate the value of its assets over the next few years.

Foolish takeaway

Buyer beware. Oil prices are highly volatile currently, and that likely means a rollercoaster ride for the share prices of oil companies.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.